Weekend Update #2

CRUDE
Crude finished a 3 wave structure to the downside on Monday and then spent the remainder of the week going up in impulsive price action.

It appears that she is tracing a double zigzag for minute [b]. This means that the Monday low would be a minuette (x) wave. From that low, we should see an abc up of minuette degree to complete [b]. If this is the correct structure, we will see 7 waves.

It appears that the first leg, which is minuette (a) , has completed, as there is clearly 5 waves up that finished at the 74.31 H.

It is unclear if minor B will take the form of a triangle or not. It sure has the look and feel, as previously mentioned.

Upside targets include 76.30, which is the 61.8% projection of (a) and 78.93, where (c) = (a). Basis October contract.

The 2 bar daily projection comes in at 74.97. Basis continuous contract.

It should be noted that the combined contract made new yearly highs this past week.


DOLLAR INDEX
It appeared that all systems were a go on Monday. Turned out it was really a no-go, as the dollar got kicked around the rest of the week.

Where are we at now? Well, she better save herself fast if the 77.52 L was a bottom. You can make a decent case that structure has been tracing out an expanded flat.

That is my preferred count, unless the 77.52 low is breached. I really think the odds favor a break at this point, however, I will let price action determine that.

If the flat scenario is to play out, the dollar needs to start heading to the upside soon. There isn't much room for error down here.

From a bullish standpoint, it does appear that the (c) leg may have finished. This would complete minute [ii].

I don't know folks. For you poker players, we might be looking for maybe a 2 or 3 outer here. In other words - don't count on it.

GOLD
Monday had a big gap down, which appears to have saved me some frustration and money. If you recall from last week, I wanted to be short gold via puts.

Fortunately, I did not chase (see mid-line on chart). My plan at that point was to put on a short line with a backtest of the broken up-trend line. I came close to pulling the trigger on Wednesday, but thought there needed to be another leg higher.

Friday was another gap, this time over the trend line. Bottom line - no action for VO this week in the gold market.

I show two different counts. One is bullish, the other bearish, which is still my preferred at this point. I need to see price action take out the channel and the 974.30 H to change my opinion.

There is actually a third option that may very well be in play here. For the last two weeks I have talked about the possibility of a triangle tracing. Structure may have been telling us this all along with the slow choppy price action.

One thing is for sure, it is coiling up to bust a move. If a triangle, it measures 144.30, which targets up around 1075 (basis continuous).

If you play this market, I think the conservative thing to do is wait for a break of either the 994.50 H, or the 907.20 L to place a bet. If your aggressive, like me, you can use the 974.30 H and the 927.60 L. Or better yet, do your own due diligence and come up with a game plan.

Edit: There are 2 prices on the chart that are incorrect due to rollover. The 996.50 H and 930 L. I failed to change those as I put them on manually. It's been a long day and I'm not going to update the chart as it's a hassle.

30 YR BOND
As expected, the 30 yr had some unfinished business on the upside to complete an expanded flat.

Notice the near perfect 138.2% extension of [a]. This is a very common extension for an expanded flat. Friday finished with a very bearish candle and more importantly, did not take out 121'11.5.

If my assessment is correct, bonds should be heading lower over the next several weeks.

The first order of business is to take the channel. Then we need to see decisive price action through the 114'25.5 L.

3 = 1 at 114'17. The 161.8% projection of 1 sits at 110'18. This would be a more likely target, if not lower. Ultimately, I think we probably see par.

Watch price action closely as we get to the channel. As mentioned last week, this could turn a triangle.

Weekend Update #1

SOYBEANS
This is the bigger picture view that I'm currently working from. Basis weekly composite.

Beans completed a large degree wave [III] (white) in early July 2008. A cycle a wave completed in December 2008. We are in the process of finishing cycle b.

When complete, cycle c down should ensue. That will in turn finish a supercycle degree (a).

This long-term count is taken from EWI.

After a hard down Monday, beans found support at the 61.8% retrace of 3 and rebounded nicely.

As mentioned last week, price action looks impulsive from the 1113.25 H. This bounce, so far, has taken on a corrective look. Both of these argue that minor 5 finished up at 1113.25.

We need to see price action confirm this view by decisively breaking the channel. Until this happens, I will assume that 5 is unfinished.

Should beans still need to trace out a minor 5 leg, the minimum objective would be the 61.8% projection of 1 - 3 at around 1121. Basis daily continuous contract.

WHEAT
This is the bigger picture view I'm working from. Basis weekly composite.

The wheat market completed a large degree [III] (white) wave in February 2008. It appears that the first 4 cycle waves are complete.

Wheat is in the process of tracing out a cycle V wave. This is turn will complete a supercycle (a) wave.

This long-term count is taken from EWI.

The wheat market continued selling down this past week.

Notice that price has been unable to get above the mid-line of the channel. Price action looks very similar to the June [3] leg.

My initial minimum downside target still remains at 437.50, the 61.8% of [1] - [3].

Notice the new alternate count at the bottom. When studying the weekly, it clearly looks like a 1 and 2 wave have completed and price has entered a 3rd. This would bode even worse for an already beaten up market.

It's just an alternate currently. One reason I'm hesitant about embracing that view, has to do with the steepness of the decline between this leg and the previous, which I have as primary [3].

Notice how the downside momentum (based on price action) is not as strong in this current leg. The angle of descent is not near as sharp - at least at this point.

This leads me to believe that maybe this is a [5]th. It is something I will keep an eye on.

For now, the trend is still down and any upside price action should continue to be nothing more than a counter trend move.

CORN
Here is the bigger picture view I'm working from. Basis weekly composite.

Like the other grain markets, corn completed a large degree [III] (white) wave in mid 2008. A cycle a wave finished in December 2008. It appears that cycle b has completed and we are in the process of tracing out a c leg.

This will complete a supercycle (a) wave.

This long-term count is taken from EWI.

It appeared that price was going to take out the 7/22 low at 304 on Monday, however, it was spared for the time being.

I have changed my labels to reflect that intermediate (1) completed at the 304.25 L. If you drill down intraday, I think that structure argues this.

Friday saw price get rejected at the 38.2% retracement of (1). Friday also put in a bearish candle. It's unclear whether this retrace has finished or not.

I would not be surprised to see additional upside pressure for a few more days. There is also the possibility that [4] could still need more work. This would call for a triangle, or some type of complex structure.

Based on how the structure looks, my guess is that [4] is completed.

There is also the outside chance that the 5 wave leg down to 304.25 completed primary [5] (truncated), thus completing cycle c and supercycle (a). I don't believe the odds favor that, although, it can't be ruled out.

Once price takes the 304 L, I expect price to achieve the 270 level. This is the 61.8% projection of [1] - [3]. (3) = (1) at 267.75.

Crude

Crude finished down on low volume. Range was a very smallish $1.54 (31 ES handles).

They call these consolidation days.

Not a whole lot to report about. It appears that we are working a complex corrective for minuette (b). 5 waves down should complete micro [Y] .

Even though today was very small for crude action, there were still .30 - .40 moves all day. It was very tradable.

If my interpretation of structure is correct, we should finish up (b) sometime tomorrow. (c) up is next.

The bigger picture should clear soon as well.

ES

ES finished the day higher (in case you fell asleep). Range was a smallish 13.50 handles, while volume contracted from yesterday.

I had to make some minor changes with the degree's, but so far so good with the beginning of minor C. It actually counts fairly well - until we get to the 1003.75 H.

It appears that we are in the process of tracing an expanded flat for minute [ii]. minuette (b) reached the 138.2% extension of (a) to the tick. This is exactly what you should expect with a flat that expands.

There are other options, but I'll go with this for now.

I don't really expect a very deep retrace for minute [ii] for several reasons, although I could be dead wrong. I will be happy if they can get it to the 50% retracement level at 990.25, but I'm thinking the 38.2% may be all she gives.

You will remember that minute [ii] of A retraced a full 99%. The big difference there was that we had a deep retracement in terms of price and time from the 950's. Momentum was clearly to the downside.

Complete opposite up here. We have had a very shallow retracement that has not taken much time at all. There is very little downside momentum imo. I believe the odds favor a small retrace.

It is possible that I may need to ratchet my degree's back down. [i] of A was 19 handles. [i] of C measures 27. I'm satisfied that I have the correct degree's, but you never know.

My alternate remains that this is part of a complex correction for minor B.

Smallies did a good job of bailing at the highs, but it appears they were covering into the close.

Tomorrow is expiry. Not sure what, if any, tricks are up their sleeves. I keep hearing how "max pain" is significantly lower around 970.

We may very well get there, but structure doesn't suggest it.

We could have a cycle peak tomorrow based on the daily days of 8/12 and 8/17. Monday is showing up as a low fwiw.

Crude

Crude exploded higher by 4% today. Another monster range day at $4.53 (over 90 ES handles). Volume was equally impressive.

Well folks, I think they are throwing a double zigzag on us. This means minute [b] is still in progress.

It appears that we have finished, or nearly, minuette (a). We should see a retrace, and then another 5 wave structure to complete [b]. If I'm correct in my assessment.

I had mentioned last night that maybe (c), and thus [c], might have completed. I just can't believe that, although, I suppose it's possible. The degree's just wouldn't make sense.

We have a nice 5 wave structure off the 67.42 L. All the subwaves are clean with no overlap - that is an impulse.

I show sub-minuette v completing at the 74.31 H, however, it's possible it has a little bit of work left.

The retracements are on the chart. This assumes that the 74.31 holds as the high.

I do have an alternate at the bottom. There are a couple of other options as well. No need to delve into those unless we have to. I'm comfortable with my preferred, at least until tomorrow :)


No question, this is by far, the best trading market out there. Huge volatility, ample liquidity, and trades technically sound for the most part. What more could you ask for? Yup - this has become VO's market.

ES

The equity markets did an about face early this am and put in a bullish candle after selling hard overnight. We had well above average volume and a 22 point range.

I believe that we have completed the flat that has been tracing out since the 1016 H. We had a countable 5 subwaves down from the 990 H. This would mean that minuette (v) was a truncation (didn't finish below (iii)).

According to the good book, "A truncation often occurs following a particularly strong third wave" (p. 35, figure 1-12 Elliott Wave Principle). Well, I wouldn't really call that a strong (iii), at least by my definition. But it was 31 handles.

The word often implies that it happens more times than not, but not always. The structure is what it is, and if it's a truncated 5th without a strong 3rd - so be it. Perhaps I'm wrong.

So if [c] has finished, where does that leave us? My preferred count is that minor B completed, but I'm not 100% confident about it. There are alternatives that make sense.

Perhaps the completed flat is one part of a bigger complex corrective, as my alternate count shows. If we have not retraced minor A enough in time and/or price then my alternate count will come into play.

It appears that we had a 5 wave move off of the 976.75 L. I have this labeled as minuette (i) of minute [i] of minor C up. This count would be invalidated with any price action that trades through the 976.75 L.

Here is a big picture view of the whole structure off of the 865.25 L. From a visual standpoint, I have no problem with it.

We have the "minimum" requirements for both price and time met. My preference would have been a better/bigger B retracement, and that's still entirely possible.

Targets? Firstly, we need to finish tracing (ii), as it doesn't appear to be impulsing off the 991.50 L. When complete we will be able to get short-term targets.

The gap at 1006.50 will be the first order of business, then I will assume the 1016 H should see some resistance.

Bigger targets include 1126.50, which is where AB=CD. The 61.8%, which is the minimum we should expect, sits at 1068.75. The retracements from the 07 high are: 50% = 1126.75 and 61.8% = 1237. All basis continuous contract.

I really would prefer that B be complete. The entire A leg was a PITA, starting with the 99% retrace for (ii) down there at 865.50. If C is anything like A, I'm going to go sell ties in the mall until it's over :)

Another nice day of accumulation from both sides.

There was a nice setup today with our wave iv. I'm not sure if it was a straight triangle or a combo flat/triangle. Regardless, it was an easy trade. And yes - I bailed WAY too soon.

Besides the obvious, one of the reasons I love triangles, is they are a marker. They let you know where you are in the structure. They only happen in certain places, which include 4's, B's and X's.

I would be remiss if I didn't mention that 60 minute time cycle (KoolsTools) that came in like a champ at today's high.

I covered my SPY puts at the open (literally - my time stamp said 8:30.12) for +.70. It wasn't much in terms of dollars, but $350 buys quite a few jugs of V.O. :)

Crude

Nice reversal day today. We had a $4+ range, but have you guys noticed how light volume has been the last couple of days.

All numbers are October basis unless noted differently.

I have changed the count to reflect that we obviously finished "something" down at the 67.42 L. I have labeled the low as minuette (a), however, I have a sneaky feeling that it is actually (c).

That would entail minute [b] completing up at the highs. You can make a better case for that with the October contract.

Sure feels like their churning 3's for a triangle (look at the daily).

It appears that we are very close, if we have not already done so, to finishing c, thus completing (b). If this is correct, we should be beginning (c) down.

I have to tell you folks, I am very unsure of specifically where we are at. For the time being I will assume that [b] finished at the 73.92 H in a truncated 5th.

Here is a look at my trading chart. Notice how well the c leg channeled.

As always, pay attention to price action - not the silly labels.

ES

ES grinded higher today on below average volume. Range was 13.75 handles. Very sleepy price action.

It appears that we traced out the majority of minuette (iv) today. I would not be surprised if they took care of the remainder during globex.

I am assuming that we completed (iii) at the 976 L. It is possible that was in fact (v). If (v) completed down there, we may have finished minor B. That is my alternate count. As always, there are other options.

The line in the sand for my current count is the wave (i) L at 992.25. If price trades through that, then we know something else is in play. Perhaps, a (i)-(ii), i-ii scenario, but I doubt it.

AB = CD at 989.75. The 50% retracement level of (iii) sits at 991.25. There is also a nice trend line directly above. Not a lot of room for error here folks.

Both started accumulating early and continued all day.

For all the buying that took place, price sure didn't seem to reflect it.

Watch your channel folks. It will let you know when (iv) has completed.

Edit: failed to mention that I bought a handful of SPY puts at the close. Trying for a quickie here with the August 102's. Hope my count is right!

Crude

Crude Is another another market that did most of its damage in globex. Matter of fact, it had a positive pit session. Range was $2.46, while volume continued to decline for the 4th staight session.

It appears that we finished 5 waves down of micro degree, thus completing sub-minuette iii. It also appears that we have finished [A] up, of what will be a corrective zigzag. How do we know it will be a zigzag? We have 5 waves up for [A].

Notice the channel line action. We busted through, went and backtested and failed the first time (which we would expect), before being able to work our way back above.

Notice also the monster RSI divergence to finish off iii. Impressive indeed.

We either completed a minuette (a) or (i) leg down there. If they are turning a triangle here (check the daily), then it was an (a).

Regardless, after a brief pause here, we should see additional strength to finish off the corrective with a [C] leg. After that, the resumption of the downside should continue.

Edit: I forgot to talk about the daily channel (see weekend daily chart). Notice where price supported almost to the tick. I think that is important. Perhaps the next leg down finds support again and completes there.

For those of you that don't use channels, I would encourage you to start.

ES

The equity markets sold hard today (well actually last night). ES had a range of 28.75, which is very misleading. Most of that occurred in globex. Pit session range was 9.50. Volume spiked higher.

Yepper, she's a flat. As discussed in the weekend update, the structure was not there for a triangle. The triangle was invalidated when we broke the 985.75 L.

It is sorta difficult to get an accurate count on the subwaves from the 1007 H because every candle was basically straight down.

Therefore, I'm not sure if we have completed minuette (iii) or not. If not, I suspect we are close. Based on wave (ii), we should see some type of complex structure for (iv).

Targets include the 161.8% of (i) at 969 and the 161.8% of [a] at 966.75. (ii) retraced 61.8% of (i), so I will assume that they get us to the 161.8% at minimum.

Also, we are in the zone of the 4th of lesser. I'm not sure if we get a big push for this minor B wave or not. If we do, I have a bevy of numbers that come in around 955ish, which is close to the 38.2% at 958.50.

Short-term, RSI is giving a nice positive divergence.

As mentioned above, the majority of the decline came in globex. Even so, I still would have expected the 100 lotter's to have been less than the -19.5k they finished at.

Notice the smallies covering like bandits in the last 15 minutes of trade.

Bottom line - I don't think we have finished tracing minor B. With that said, I'm also not real confident, based on structure so far, that this retrace will even make it to the 38.2%. Perhaps I'm wrong.

Weekend Update ES

ES The equity markets ended the week exactly where they began. We did, however, gain a little bit of clarity with structure.

It appears that we are tracing either a barrier triangle (p. 50, figure 1-42, Elliott Wave Principle) or a flat. We had a 3 down that finished at the 985.75 L. We then had a 3 up that finished at the 1015.75 H. From that high, Friday's action was a 5 down with what appears to be a 3 up.

Everybody is calling for a triangle here. I'm not so sure. In order for the triangle to still be in effect, the minute [c] leg must be a 3 and not a 5. That means it will need another 5 down to complete a zigzag.

So, [c] is either not complete, or we have a flat and not a triangle. The flat is my preferred count. The triangle is my alternate.

I have seen where some people are calling for a "running" triangle (p. 50, figure 1-43, Elliott Wave Principle). This assumes that Friday's 992.25 L finished [e]. Again, [e] would need to be a 3.

There are other issues I have with this interpretation. I will quote from the good book, "Despite their sideways appearance, all triangles, including running triangles, effect a net retracement of the preceding wave at wave E's end" (p. 49, Elliott Wave Principle). The net retracement is by the slimmest of slim margins.

Off of the 992.25 L, which by the way was a 78.6% retrace of [b] to the tick, price has retraced to the 61.8% of (i) and conveniently stopped at the down trend line. 1006.50 was also the 261.8% projection of a.

Based on structure, it appears that we should have one sub-minuette leg up. This should complete (ii), or (b) of [c] if a triangle. Any breach of 985.75 invalidates the triangle scenario all together.

Likewise, if price prints 1016 we can say adios to the flat.

Here is my big picture look at cash. Notice I have ditched the triple zigzag. As I sated previously, it really doesn't matter, you end up in the same place, same time.

It should be noted, the 60 minute SPX chart has two potential setups that may come into play (outside of the triangle).

You can make a case for a H/S top formation. There is also a fantastic looking Bear Butterfly that would complete at 1025.

Both these patterns should be clearly recognizable on the 60 minute chart.

Weekend Update Crude

CRUDE I wanted to start with the big picture first. I have adopted this view, as it is EWI's.

Based on this interpretation, the July 08 high completed a wave (V) of Supercycle degree. The ensuing decline down to the 32.40 L, that ended in December 08, completed an intermediate (A) wave.

We have been in the process of tracing out a (B) wave for all of 09. When (B) finishes, we should see 5 waves down of intermediate degree, which would complete (C), thus completing primary [2] (shown as circled on chart).

So, the big picture suggests that crude should go higher first, then significantly lower. I believe the downside target is around 10 (basis combined monthly)

This process should take a few years to play out. Long-term, if the interpretation is correct, should see crude at levels that are hard to imagine at this point.

Here is a look at the daily. I have ratcheted down my labels by one degree.

It appears that minute [b] has completed. Notice the break of the mid-line of the channel that had supported for a couple of days.

Price came within a whisker of the 23.6% retracement level of minor A. [c] = [a] at 57.39. The first little daily swing projects to 62.03, which is very close to the 38.2% retracement. All basis continuous contract.

Don't be surprised if they turn a triangle here. It has all the makings so far. My alternate is at the bottom.

Drilling down further we look at the 60m. I show v completing at the 71.80 H. That is the best I can come up with, however, it's possible that it ended up in that mess.

This would be a classic truncation if correct (p.35 Elliott Wave Principle). Regardless, it was a very unsatisfactory top IMO.

We took out the wave i H of 67.79 on a close, which is denoted by the dotted red line. We also appear to be impulsing down.

Although you can't tell from this 60m chart, I believe we are tracing a [4]th wave, maybe even a triangle, of most likely micro degree. This should be evident on any smaller trading chart.

The first objective will be to break the channel line. This should come into play around the mid 66's. The 261.8% of i sits at just under 66.

Short-term, RSI is oversold. I suspect we will finish up this first impulse fairly soon with a retracement coming sometime Monday.

Edit: failed to mention that Monday should be a cycle peak day (KoolsTools). This comes from the 7/13 and 7/29 lows. Friday also gave us a small cycle low day. There are several confluences pointing to an up day for crude Monday.

As always, follow the price action and structure firstly.